Top 10 Dividend Stocks for 2021 report published

I am a big fan of dividend growth investing. You might say I have an obsession with dividends. I believe dividends are the world's most reliable passive income stream.

There are lots of good reasons to begin a lifelong love affair with dividends. With their predictability, dividends will be there for you when the market betrays you. Dividends will protect you and keep you safe during market lows – the best dividend growers will still pay you even when the market tanks. Governments often treat dividend income in a preferential manner when it comes to taxation. Dividends can grow over time, which is often a positive indicator of a company’s financial health and growth. Plus, many dividend paying companies have dividend re-investment programs that act as an accelerant to compound growth and help you buy more shares when the price is lower. But the biggest reason why I love dividends is simple – high dividend yielding companies outperform companies with low to no dividends.

History has shown high dividend yielding companies, on an annualized total return basis, have outperformed the lowest dividend yielding companies by 3.68%, and the S&P 500 by 2.45% from 1957 – 2012.

Source: The Enduring Qualities of Dividends, Lyle B. Schonberger, May 21, 2013; Ameriprise Financial

There are a lot of options for dividend investors to consider, including Dividend Kings (50+ years of annual dividend increases) and Dividend Aristocrats (25+ years), or my favorite category of emerging dividend starts (annual dividend increases of 6% or more).

To help investors find and consider solid dividend growth stocks I have prepared my second annual Top 10 Dividend Stock report. My 2021 dividend picks are vetted using my methodology for investing in the right dividend stocks, included as part of the Wealthy Owl's Guide to Dividend Investing. My process includes consideration for dividend growth track record, ability to sustain dividend growth, business model and current valuation.

Dividend Selection Criteria

Performance of my 2020 picks

Reflecting on my 2020 report, I am pleased with the performance overall of my portfolio of picks. Over a one-year period, from when I selected them on October 29th 2019, the portfolio delivered 27.4% in stock price appreciation. The Dow Jones US Select Dividend Index and S&P 500 over same time period delivered -20% and 11%, respectively. The total dividend yield on cost of the portfolio of picks finished the year at 2.8%. All 10 stocks raised their dividend year-over-year, with an annual dividend increase of 7.5% as a portfolio. Total return (stock price appreciation + dividend yield) for my top 10 dividend stock portfolio was 30.2%.

The biggest gainer from my 2020 selections was Apple (up 83%, with a 7% increase in annual dividend). There were above market performances from four other stocks (Houlihan Lokey, Abbvie, T Rowe, and BlackRock). Only three picks decreased in value, but all had healthy annual dividend increases.

2021 Picks

This year's picks cross a wide variety of industries, including financial services, technology, services, entertainment, pharma, real estate, retail, and renewable energy.

Learning from last year's picks, I decided to put more focus on earnings growth for my 2021 selections. I want annualized Earnings per Share (EPS) growth over the last 5 years of 10%+. This means that I may lose a little yield, but I feel the trade off is worth it when you factor in the dividend growth stocks that can now be included in my portfolio. With an average yield of 2.9%, my portfolio of top 10 dividend stocks for 2021 remain attractive dividend investments. And, over time these dividend growers will become high yielding, to go along with their higher growth. It turns out you can have your cake and eat it too.

While I'm feeling pretty bullish about these picks, markets over the course of a year cannot be predicted. One thing I believe you can count on with these stocks is an increase in their annual dividend. I'm looking forward to reporting back to you the overall performance of this portfolio of my top 10 dividend stocks at the end of 2021, no matter the result.

If you are interested in downloading your free copy of the Wealthy Owl's top 10 dividend stocks for 2021, sign up for my free monthly newsletter now.

Happy investing and happy holidays!

The Wealthy Owl